UBS Suspends 2 Bankers in China Hiring Investigation

HONG KONG â€" UBS has suspended two staff members, including its top capital markets banker in Asia, as the Swiss bank investigates its hiring the daughter of the chairman of a Chinese chemicals company that is considering a $1 billion share sale the bank has sought a role in.

UBS has placed Joseph Chee, head of global capital markets for Asia, and Sharlyn Wu, a junior member of the capital markets team, on a leave of absence while it conducts an internal investigation into whether the proper protocols were followed regarding the bank’s employment of Joyce Wei, a person with knowledge of the investigation, who was not authorized to speak publicly about the matter, said Tuesday.

Ms. Wei is the daughter of Wei Qi, the chairman of Tianhe Chemicals â€" a privately owned Chinese company that is considering a potential $1 billion initial public offering in Hong Kong this year. UBS is one of the banks positioned to secure a role in the deal.

Ms. Wei joined UBS in October as a member of the bank’s equity and capital markets team, according to Hong Kong regulatory filings and the person familiar with the matter. Previously she worked at JPMorgan Chase, which recently removed itself from a potentially lucrative underwriting role on Tianhe’s planned I.P.O. as a United States investigation into the American bank’s hiring practices in China moves forward.

Ms. Wei, Mr. Chee, Ms. Wu and Tianhe did not immediately respond to requests for comment on Tuesday.

The Securities and Exchange Commission and federal prosecutors in Brooklyn opened an investigation last spring into whether JPMorgan’s “Sons and Daughters” program of hiring the children of executives at government-owned Chinese companies was directly linked to winning business from those companies. The inquiry has broadened since then, and UBS is among at least six other banks, including Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs and Morgan Stanley, which have received requests for information.

Mr. Chee and Ms. Wu were placed on leave last week while UBS investigates the circumstances of Ms. Wei’s employment, the person familiar with the matter said.

“It’s not a ‘princeling’ issue, because Joyce Wei is not a princeling,” the person said, referring to the children of senior Chinese government officials.  ”Tianhe is not a state-owned company,” the person added. Instead, the investigation is focused on “whether internal processes were adhered to or not.”

News of the staff suspensions at UBS was first reported on Monday by International Financing Review.

Authorities in the United States are exploring whether JPMorgan and other Wall Street banks may have violated the Foreign Corrupt Practices Act. The United States law bans bribery of foreign officials, but would apply only if it could be shown that a bank explicitly swapped job offers for business deals with Chinese government officials. Such a bank must also have operated with the “corrupt intent” to influence a Chinese official, a blurry line that might be crossed if unqualified employees were hired.

Even if federal authorities decline to pursue a case against the bank, JPMorgan’s hiring practices could also raise concerns with the authorities in Britain and Hong Kong, where anti-bribery laws are stricter than those of the United States and apply to dealings with private businesses as well as government officials.

AOL’s Error Leads to a Study in ‘I’m Sorry’

Was Tim Armstrong’s apology authentic?

Last week, I wrote about the increasing tendency of leaders and executives to provide cheap apologies as an easy way to wash away problems. Dov Seidman, founder of LRN, a firm that advises companies on their cultures and how they can translate them into better performance, described the “I’m sorry” epidemic as “apology theater.” We pledged that we would begin tracking apologies and their aftermath.

Almost on cue, a highly publicized case study arrived in the form of Mr. Armstrong, the chief executive of AOL.

On an internal call last Thursday, Mr. Armstrong described recent changes in the company’s 401(k) program, which alters the way it matched employee contributions. The matching payment would come as one lump sum at the end of the year instead of in each pay period. In explaining the switch, he extolled the company’s benefits program and said that it would help save money amid rising health care costs.

Then, he provided this example of those costs: “We had two AOL-ers that had distressed babies that were born that we paid a million dollars each to make sure those babies were O.K. in general,” according to a transcript provided by an AOL employee. “And those are the things that add up into our benefits cost. So when we had the final decision about what benefits to cut because of the increased health care costs, we made the decision, and I made the decision, to basically change the 401(k) plan.”

With that, the Twittersphere was set aflame. The criticism came fast and furious.

“I take issue with how he reduced my daughter to a ‘distressed baby’ who cost the company too much money. How he blamed the saving of her life for his decision to scale back employee benefits,” Deanna Fei, the mother of one of the babies and wife of an AOL employee, wrote on Slate. She is a novelist and the wife of Peter Goodman, an editor at AOL’s Huffington Post.

“For me and my husband â€" who have been genuinely grateful for AOL’s benefits, which are actually quite generous â€" the hardest thing to bear has been the whiff of judgment in Armstrong’s statement, as if we selfishly gobbled up an obscenely large slice of the collective health care pie.”

Nearly 2,000 comments poured in, cheering her on.

Over the weekend, Mr. Armstrong reversed course and apologized.

“I made a mistake,” Mr. Armstrong said on Saturday in an email to his staff. “I apologize for my comments last week at the town hall when I mentioned specific health care examples in trying to explain our decision-making process around our employee benefit programs.”

He also reversed the changes in the 401(k) program.

But was Mr. Armstrong’s apology simply convenient public relations? After all, apologizing is easy, sincerity is harder.

Before we get to the apology itself, let’s examine the error.

Mr. Armstrong was, to put it generously, impolitic in his language and description of the situation. Many who heard his remark found it offensive. Singling out a specific medical situation, even without identifying the employee, feels to some like a personal violation, especially when they believe it is tied to a decision to cut back on another benefit program. It is even tougher to swallow on a day when the company reported a robust financial quarter.

Of course, there is something valuable to be said about having an honest conversation about a company’s expenses and using real-life examples â€" even when they make people uncomfortable â€" as opposed to generalities.

In truth, and I imagine I will be criticized for saying this, I strongly suspect Mr. Armstrong mentioned the “distressed babies” not to cast blame or point the finger but to convey the sincerity in which he believed the company stands by its employees. I think the intent of his comment was something like, “Hey, we think we have great benefits and here’s an example: We just spent $2 million last year to help some of our employees in a tough situation.”

Regardless of his intent, Mr. Armstrong recognized his mistake and was moved to apologize. Was he sincere?

I’m inclined to believe the apology was authentic. It wasn’t just words but was backed up by action â€" the reversal of the 401(k) match plan, which will most likely cost real money. A skeptic could say the money doesn’t belong to Mr. Armstrong but to the shareholders, or that it will likely come out of the employees’ pockets in some other way, or that he should contribute some of his own $12 million in compensation. That’s all true but probably a topic for another column.

In some regard, I’m of two minds about rolling back the 401(k) match plan. While it suggests he listened closely to the feedback of his employees who were upset about it, I’m worried two things became conflated: the change in the 401(k) program, which was unpopular but appears to be an unfortunately growing trend for companies to save money, and Mr. Armstrong’s comments about “distressed babies,” which was the clear mistake.

It is worth noting that Mr. Armstrong, who has a history of speaking off the cuff, has publicly apologized before. Last year, he fired an employee who was taping an internal call â€" after being warned not to do so the previous day â€" on the spot in front of the staff. It was a clear misstep to do so in front of the other employees.

But on his most recent foot-in-mouth, perhaps the most important issue in evaluating his sincerity was that his apology wasn’t just the public one we read about. He called some of the affected families personally.

The real arbiters of Mr. Armstrong’s sincerity are those whom he directly offended. So I asked Ms. Fei.

“I accepted Tim Armstrong’s apology, and I take him at his word that he’s genuinely pained by the pain he caused my family,” she told me.

“He spoke to me on a very personal level, as a human being and a fellow parent, and I think his regret is heartfelt. I am profoundly grateful for the support that my family received from AOL during our medical crisis, and I think AOL does strive to take care of its employees.”

“I felt the need to point out the gross injustice of putting any individuals on the defensive for suffering a medical crisis and simply using their health benefits,” Ms. Fei added.

“I think it’s legitimate and necessary to have a public discussion about health care expenditures, but this has to be done with sensitivity and mindfulness of the human lives at stake.”

Andrew Ross Sorkin is the editor at large of DealBook. Twitter: @andrewrsorkin

Court Rejects Apple Appeal in E-Book Case

The court-appointed monitor in the Apple e-book price-fixing case can get back to work.

A federal appellate court on Monday rejected Apple’s request to stay the monitor, Michael R. Bromwich, a Washington lawyer, from doing any more work pending the outcome of its challenge to a judge’s earlier order appointing the monitor in the first place.

But a one-page ruling from the three-judge panel of the United States Court of Appeals for the Second Circuit did put some limits on how far Mr. Bromwich can go in demanding documents and interviews with Apple employees.

The ruling said that the monitor’s job was to make sure the company was putting in place procedures to comply with federal antitrust laws and that Apple executives and board members “are being instructed on what those compliance policies mean and how they work.” Yet, the order went on to say the monitor was not supposed to “investigate whether such personnel were in fact complying with the antitrust or other laws.”

The appellate panel said the limits were consistent with the trial court’s initial order and statements made by lawyers for the federal government, which brought the lawsuit, at a hearing last week.

In October, Judge Denise Cote of the United States District Court in Manhattan appointed Mr. Bromwich as the monitor after she earlier determined that the company conspired with five publishers to fix prices for e-books.

In January, Judge Cote rejected Apple’s request that she remove Mr. Bromwich. She told the company and its lawyers to stop challenging the monitor’s authority and let him do his work.

Apple contends the appointment of a monitor is unwarranted and represents a major intrusion into its business practices. The company has argued there is no need for a monitor because it is already moving to enact a plan to bring its pricing policies for consumer goods into compliance with federal antitrust laws.

K.K.R. to Close 2 Mutual Funds

Kohlberg Kravis Roberts is closing two mutual funds less than two years after it started them, a setback for the private equity giant as it looks to attract smaller investors.

The two funds, the KKR Alternative High Yield Fund and the KKR Alternative Corporate Opportunities Fund, have stopped selling shares and plan to liquidate by around March 31, according to regulatory filings on Monday. Investors will get their money back at that time.

Started in 2012, the funds were part of K.K.R.’s strategy to attract capital from investors who would not be able to access traditional private equity funds, which count wealthy individuals and institutions as investors. Some of K.K.R.’s big rivals, including the Carlyle Group and the Blackstone Group, have also unrolled products aimed at retail investors.

But the two K.K.R. funds were hurt by a competitive marketplace and a flawed design, according to a person briefed on the matter who was not authorized to speak publicly about it.

The corporate opportunities fund had an application process that was too onerous, adding paperwork for financial advisers and investors, this person said. In addition, its quarterly liquidity feature was a deterrent to investors who expected to be able to get their money back at any day they needed it.

In the case of the high-yield fund, which invested in risky debt, K.K.R. found it difficult to offer a unique angle in a highly competitive market, the person briefed on the matter said.

Still, K.K.R. is continuing its push to attract individual investors. The firm raised $4.7 billion from individuals last year, including wealthy customers, roughly 22 percent of the total money it raised.

“Over the last three years, K.K.R. has been expanding its investor base to enable individual investors to participate in K.K.R.’s investments,” Kristi Huller, a spokeswoman for K.K.R., said in a statement. “We have a number of other offerings for individual investors, including private equity, under development for launch this year.”

The funds’ closing was reported earlier by Bloomberg News.

Charter C.E.O. Is Pressing All the Right Buttons on Time Warner Cable

Thomas M. Rutledge seems like a man on a mission. The U.S. cable operator he runs, Charter Communications, is preparing a slate of replacement directors for larger rival Time Warner Cable, the target of his $60 billion hostile bid. He may also have roped in Comcast to alleviate financial worries about the plan to take over his former employer.

Almost a year ago, Mr. Rutledge gained the backing of cable magnate John C. Malone, whose Liberty Media bought a 27 percent stake in Charter. Not long after, Charter made its first approach to Time Warner Cable. The company’s latest bid, at $132.50 a share, falls short of the $160 headline valuation demanded by Robert D. Marcus, the target’s chief executive.

The resistance has only emboldened Mr. Rutledge, who was once a candidate to lead Time Warner Cable but lost out to an internal rival. He is now on the verge of proposing 13 new members to his quarry’s board. Comcast may also be willing to buy a big slug of Time Warner Cable’s systems from Charter, which would help Mr. Rutledge pay for the deal and make the combined company financially stronger.

Without the help, and at the currently proposed price, Charter would need to borrow about $25 billion. Add that to the $38 billion of net debt the two companies already carry and it would equate to about 5.6 times their combined expected Earnings before interest, taxes, depreciation and amortization, or Ebitda,  before any synergies. Assume Comcast buys 20 percent of Time Warner Cable’s operating earnings for 20 percent of the purchase price in cash. Then, even at a sweetened $150-a-share price, the leverage multiple would shrink toward a more manageable five times.

Mr. Rutledge’s maneuvers are keeping Time Warner Cable on the defensive, but they’re not certain to succeed. As Air Products and Chemicals can attest, infiltrating the boardroom of a target company doesn’t guarantee a deal. The three directors it managed to install at Airgas in 2010 wound up siding with their new colleagues and eventually thwarted the Air Products bid.

Comcast also might face regulatory challenges if it added to its network, meaning Charter could be forced to bear that risk in the form of a hefty break fee payable to Time Warner Cable if it pulled out of a deal. For now, though, Mr. Rutledge is proving adept at methodically marshaling forces against the company where he used to work.

Jeffrey Goldfarb is an assistant editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Justice Department Sued Over $13 Billion JPMorgan Pact

With a record $13 billion sticker price, the settlement deal between JPMorgan Chase and the government captured the attention of Wall Street and Washington late last year.

And yet, according to a lawsuit that a nonprofit group filed against the Justice Department on Monday, the crucial details of the deal were for the government’s eyes only.

The lawsuit filed by Better Markets, a group critical of Wall Street, challenged the constitutionality of the deal, a landmark settlement stemming from accusations that JPMorgan overstated the quality of mortgage securities it sold before the financial crisis. In a complaint filed on Monday in the United States District Court for the District of Columbia, Better Markets argued that the Justice Department violated the constitutional principle of separation of powers when it “unilaterally” struck the deal without a judge’s blessing.

“The executive branch, through DOJ, acted as investigator, prosecutor, judge, jury, sentencer and collector, without any review or approval of its unilateral and largely secret actions,” Better Markets said in the lawsuit.

JPMorgan declined to comment. In a statement, the Justice Department said it “is confident that the settlement reached with JPMorgan Chase complies with the law.”

But the lawsuit from Better Markets, the latest development in a case that was long thought to be closed, could provide a backdoor route for subjecting the deal to judicial scrutiny. Better Markets is seeking to have a judge approve an injunction that would scuttle the pact â€" unless the Justice Department provides “an ample and detailed record so that such court may review all the facts and circumstances.”

Better Markets said the lawsuit was probably the first of its kind.

While the lawsuit’s prospects are uncertain, the case could muddy the image of an investigation that put Wall Street on high alert. The deal, lawyers and bankers say, laid the groundwork for a number of other approaching settlements with big banks.

For JPMorgan, the deal resolved an array of state and federal investigations. Under the terms of the settlement, JPMorgan will distribute the $13 billion to several states, the Justice Department and an alphabet soup of federal agencies, including the Federal Housing Finance Agency. Some money is also earmarked to help struggling homeowners.

Dennis Kelleher, the head of Better Markets, was an instant critic of the deal. When the settlement was completed in November, Mr. Kelleher questioned why the Justice Department declined to air its accusations in a lawsuit before settling with JPMorgan. A settlement reached after a lawsuit would have been subject to judicial approval.

Instead, the Justice Department published on its website an 11-page “statement of facts” outlining the bank’s wrongdoing. The actual settlement deal, a 16-page document detailing the terms of the settlement, is also public.

But Better Markets argues that those documents have some important omissions. The Justice Department, the lawsuit notes, “did not disclose the identity of a single JPMorgan Chase executive, officer or employee, no matter how involved in or responsible for the illegal conduct.”

Better Markets also highlighted some ambiguity about the breadth of the wrongdoing covered in the deal. One government document stated that the investigation spanned from 2005 and 2008, while another document refers to activity from 2005 to 2007.

“This contract was the product of negotiations conducted entirely in secret behind closed doors,” the lawsuit said. “No one other than those involved in those secret negotiations has any idea what JPMorgan Chase really did or got for its $13 billion because there was no judicial review or proceeding at all regarding this historic and unprecedented settlement.”

As Investor Calls for a Sale, Helen of Troy Unveils a Big Stock Buyback

Helen of Troy has already suggested that it would return money to investors, but it wasn’t interested in selling itself, despite calls from an activist investor.

Then on Monday, the consumer products company unveiled a doozy of a shareholder-payout program.

Helen of Troy said that it would buy back $550 million worth of its shares over the next three years, to be financed by cash on hand and loans. It will begin with a $300 million tender offer starting immediately.

The buyback is huge, representing nearly 29 percent of the company’s outstanding stock. But it isn’t clear whether Sachem Head Capital Management, the hedge fund looking to shake up the consumer products maker, will find it enough.

In a letter sent last week, Sachem Head argued that the company â€" which owns the housewares maker Oxo International and produces products for brands like Revlon and Dr. Scholl’s â€" should consider selling itself, given what the hedge fund said was interest from a number of potential suitors.

Helen of Troy responded that it believed its shares were undervalued, and that its board had already taken steps that addressed Sachem Head’s complaints on matters including executive compensation and a succession plan for chief executive.

But Sachem Head also suggested that if the company wouldn’t sell itself, it should consider taking on debt to finance buybacks or special dividends.

What Helen of Troy announced on Monday hews pretty closely to that alternative, though the company noted that it said last year that it would return capital not earmarked for strategic acquisitions to shareholders.

“Utilizing our strong balance sheet to fund a significant share repurchase provides immediate and continuing benefits to shareholders and underscores our confidence in the company’s current strategy and future growth potential,” Timothy F. Meeker, the company’s chairman, said in a statement.

It isn’t clear whether Sachem Head, whose founder is a protégé of the veteran activist investor William A. Ackman, will be appeased by the plan. A spokesman for the hedge fund declined to comment.

Other investors seemed pleased, however. Shares in Helen of Troy traded near highs on Monday afternoon at $63.56, up 7 percent for the day.

Goldman Promotes Ashok Varadhan to Co-Head of Securities

Goldman Sachs on Monday named Ashok Varadhan as co-head of the securities division, a significant promotion that has in the past paved the way to the bank’s upper echelons for other top-ranking executives.

Mr. Varadhan, who most recently served as head of macro trading in the securities division, will join the co-heads Isabelle Ealet and Pablo Salame in his new role.

The move was announced in an internal memo signed by Lloyd C. Blankfein, Goldman’s chief executive, and Gary D. Cohn, the president. A Goldman spokesman confirmed the appointment.

“As a long-tenured leader in the securities division, Ashok has demonstrated dedication to our clients and a deep understanding of our business,” the memo said.

Mr. Varadhan joined Goldman in 1998. He became the global head of foreign exchange in 2007 and was named the global head of fixed income, currency and commodities emerging markets in 2008. He was named managing director in 2000 and became a partner in 2002.

The securities unit is the largest of Goldman’s four divisions and generated more than half of the bank’s revenue in 2012, according to its most recent annual filings. Co-leading the division is seen as a steppingstone to the most senior management jobs. Mr. Cohn was at one point a co-head of the division, as was Harvey Schwartz, the chief financial officer.

But leadership of the unit has not been without turbulence. Two of the four executives who steered the securities division during the financial crisis, Edward K. Eisler and David B. Heller, stepped down in 2012. The move raised some eyebrows because it is unusual for two division heads to depart at the same time.

The securities unit includes the bank’s fixed-income, currency and commodities operations as well as its equities unit. While the division is still a leading revenue driver for Goldman, the bank has struggled with its fixed-income business in recent months. The company reported that fixed-income revenue dropped 13 percent in 2013.

The text of the memo follows:

February 10, 2014
Ashok Varadhan Named Co-head of the Securities Division

We are pleased to announce that Ashok Varadhan has been named co-head of the Securities Division. Ashok, together with Isabelle Ealet and Pablo Salame, will continue to build our client franchise across our Fixed Income, Currency and Commodities (FICC) and Equities businesses.

Ashok most recently has served as head of Macro Trading in the Securities Division, which includes Interest Rate Products, Foreign Exchange and FICC Emerging Markets, and has oversight of the Commodities business in the Americas. Ashok joined Goldman Sachs in 1998 in Swaps Trading. After heading USD Derivative Trading in 2000, he ran North American Interest Rate Products in 2001, became global head of Foreign Exchange in 2007 and was named global head of FICC Emerging Markets in 2008. Ashok was named managing director in 2000 and partner in 2002.

Ashok has been an effective voice on a number of firmwide, regional and divisional committees, including the Management Committee, Growth Markets Operating Committee and Firmwide Risk Committee. He also serves on the Securities Division Executive Committee.

As a long-tenured leader in the Securities Division, Ashok has demonstrated dedication to our clients and a deep understanding of our business.

Please join us in congratulating Ashok on his expanded responsibilities and wishing him continued success in his new role.

Lloyd C. Blankfein
Gary D. Cohn

S.E.C.’s Losing Streak in Court Puts Agency in Spotlight

Every litigator says that trials are messy affairs because no one can predict how they will play out. After a string of recent unfavorable verdicts in fraud cases, the Securities and Exchange Commission may, too, be concerned with that trend.

The S.E.C. is a bit like the New York Yankees, because every defeat is magnified, so we should be careful not to read too much into the anecdotal evidence as garnered by the results of a few recent trials. Most cases filed by the agency are settled, garnering only modest publicity, so the effectiveness of its enforcement program is not tied solely to its wins in the courtroom.

The S.E.C.’s authority extends to civil actions, which require a lower burden of proof than the higher criminal standard of proof beyond a reasonable doubt. Nevertheless, it appears that in some recent actions - including the closely watched Mark Cuban case and ones involving accounting fraud â€" the S.E.C. may have pushed too far in trying to prove fraud. And now that the agency has said it would be more aggressive in seeking admission of wrongdoing in some cases, the agency will face pressure to figure out how to avoid wasting its resources on losing efforts.

Last month, a jury in Chicago rejected insider trading charges involving a railroad worker and his sons. The worker had deduced, based on a number of tours being given at his facility to people dressed in suits, that a merger involving his employer was likely. He and his family members bought call options, making about $1 million in profits.

The S.E.C.’s tried to prove that an employee who pieces together information about a possible transaction â€" but is not explicitly told about a deal - should constitute insider trading. When the defendant is a blue-collar worker and there is no evidence of any type of theft of confidential information, proving fraud will be difficult. Juries like to hear about some type of deception â€" not just that a low-level employee made a good guess and profited from it.

In a trial last November, a federal judge in Georgia rejected insider trading charges of a defendant who had a longtime friendship with a chief executive. In S.E.C. v. Schvacho, the S.E.C. entered into evidence a number of telephone calls and meetings between the two men while an acquisition of the company was being negotiated. But it had nothing to show that confidential information was passed to the defendant.

Although the timing was certainly suspicious, that alone was not enough to prove insider trading.

The chief executive testified he was careful not to intentionally or accidentally leak corporate information to his friend, who had bought shares of the company over a number of years, not just right before the acquisition. In an opinion issued in January, the judge concluded that: “While this timing is interesting, it is not persuasive and does not meet the S.E.C.’s burden of proof in this case.”

Stock purchases or sales immediately before a major event are always open to question. The S.E.C. is right to look at them closely, because you never know when a connection to confidential information might be uncovered.

Circumstantial evidence can be enough to sway the jury. Witness the criminal conviction last week of the former SAC Capital Advisors trader Mathew Martoma, which hinged on a 20-minute telephone call with his boss, Steven A. Cohen, shortly after Mr. Martoma received information about a failed drug trial.

But timing in life isn’t everything, and there is always the danger of falling for the logical fallacy of “post hoc, ergo propter hoc,” which means “after this, therefore because of this.” In the Schvacho case, the S.E.C. had little more than well-timed trading in the face of consistent testimony from the chief executive that he was always careful to avoid disclosing information, which the judge found “to be credible and believable.”

Even when a defendant admits to having confidential information, it alone is not enough to prove insider trading, as shown by the failed case against Mark Cuban, the owner of the Dallas Mavericks. The S.E.C. claimed that Mr. Cuban understood that he could not sell shares of a company after speaking with its chief executive about an impending development that would hurt its stock price.

The S.E.C. could not bring the chief executive to court because he refused to come from Canada to the United States, so all it had was a video recording of his testimony. Mr. Cuban denied having any agreement not to trade, so proving a violation in a case involving a “he said, he said” situation required more than just recorded testimony of a key witness whom the jury never had a chance to observe in person.

The agency has also had its share of difficulties in the courtroom involving accounting fraud cases as well. In December, two other accounting cases went against the S.E.C. A jury in Kansas rejected charges against a company’s chief financial officer, who was accused of failing to properly disclose $1.18 million in perks to the company’s chief executive. And a federal judge in Los Angeles rejected all charges against two former executives of a water treatment company accused of inflating its revenue and misleading the outside auditor.

Proving fraud is always difficult. And thanks to the oft-mentioned revolving door between the S.E.C. and private law firms, defense lawyers know almost all the tricks for fighting the agency.

The recent spate of defeats involves cases that were filed years before Mary Jo White became chairwoman of the S.E.C. Now that she has vowed to push a tougher stance in enforcement actions that calls for defendants to admit violations, the agency is going to have ratchet up the pressure on defendants. Companies are likely to balk at that standard because admitting wrongdoing could expose them in other litigation.

So the agency is likely to go to trial more often, which increases the risk of losing. Defense lawyers make invoke the recent losing streak to push the agency into dropping cases out of fear of unfavorable verdicts.

The interesting question is whether these decisions will make the agency more skittish in bringing defendants to court. The agency was criticized for not doing enough before the financial crisis to adequately police financial firms, epitomized by the long-running Ponzi scheme perpetrated by Bernard L. Madoff. Fair or not, the S.E.C. has a reputation for being afraid to push too hard.

However, if defense lawyers believe the S.E.C. will have trouble winning close cases, then they will be more willing to fight. And if an admission of liability is sought only when there is overwhelming evidence of a violation, then the new approach will be used only in a few cases.

The S.E.C. will have to strike the right balance in pursuing cases that are worth its effort. Finding that balance will be crucial to whether the S.E.C. is perceived as a fair regulator, or one that pushes too hard on losing causes.

Tech Investor to Entrepreneurs: A Harvard Degree Is a Liability

BOSTON â€" Baked into the curriculum of Harvard Business School is a course in entrepreneurship. A number of students and alumni of the school have started successful companies of their own.

But on Sunday, a prominent start-up investor had a sobering message for the elite entrepreneurs of Harvard: You are at a disadvantage when it comes to attracting capital.

“It’s really unfair to you guys, but I think you’re discriminated against now,” Chamath Palihapitiya, the founder of the venture capital fund Social+Capital Partnership, said at a conference organized by the business school’s venture capital and private equity club.

Referring to his colleagues in the venture capital industry, he added, “I would bet a large amount of money that the overwhelming majority of us would not look favorably on a company started by one of you.”

It was a jarring message to punctuate a day premised on the prodigious talent contained in the elite halls of Harvard Business School. The distinguished guests â€" luminaries of finance, technology and the law, many of whom had received an M.B.A. from Harvard â€" often took for granted that the students there would soon hold positions of power.

Mr. Palihapitiya, the closing keynote speaker, who was visiting Boston from Palo Alto, Calif., is not alone in expressing skepticism about the value of a business degree in the technology-heavy world of start-ups. In their quest to invest in “disruptive” technologies, many venture capitalists tend to look askance at entrepreneurs whose résumés are stacked with traditional markers of success.

“To see the credentialing of the entrepreneur is a little bit worrying,” Hugo Van Vuuren, a partner at the Experiment Fund, which is based in Cambridge, Mass., said on a panel at the conference on Sunday.

Even for students looking to be venture capitalists, a passion for technology is far more important than financial experience, according to Alex Benik, a principal at Battery Ventures. “Here are things I don’t care about,” he said on Sunday. “Ebitda” â€" earnings before interest, taxes, depreciation and amortization â€" “capital structure, leveraged multiples.”

Dressed casually in jeans and occasionally using profanities, Mr. Palihapitiya seemed to relish a role as a provocateur at the conference, which was in its 20th year. At one point, he said the chief executive of Apple, Timothy D. Cook, was simply “trying not to screw up.” (A spokesman for Apple did not immediately respond to a request for comment.)

He also sounded off on a recent controversy surrounding Tom Perkins, a founder of the venture capital firm Kleiner Perkins Caufield & Byers, who said that protesters criticizing the wealthy “one percent” were similar to Nazis.

“The guy is just out of his mind,” said Mr. Palihapitiya “It’s like a cautionary tale of don’t mix Paxil, Viagra and Xanax.”

On the subject of start-ups, Mr. Palihapitiya told the Harvard students that there were three industries in which they were “capable” of founding companies. These were health care, education and financial services.

“The beauty of those three things is that they’re not actually totally technologically led,” he said.

One quality that Mr. Palihapitiya likes in an entrepreneur, he said, is naïveté. If someone in the audience decided to try to solve a problem in heart disease, without any prior medical experience, “I’d fund it on the spot,” he told the students.

But a crucial trait is technological prowess, said Mr. Palihapitiya, an early employee at Facebook. He pointed to examples of programmers who were instrumental in Facebook’s early life.

One of these was a rogue hacker who attacked Facebook several times before the company eventually hired him, Mr. Palihapitiya said. Another was an idiosyncratic programmer who would take off his shoes and socks and manipulate a computer mouse with his feet.

“Those are the people who are going to come up with those ideas that change the world,” he said.

Icahn Backs Off Apple Buyback Proposal

The activist investor Carl C. Icahn on Monday backed away from his nonbinding proposal that Apple Inc. increase its stock buybacks to $50 billion after running into increasing opposition from other shareholders and a top proxy advisory firm.

The proposal had become the focus of a brewing battle over Apple and its $159 billion war chest. The company has already committed to spending roughly $100 billion over the next two years on stock repurchases and dividend payments.

Mr. Icahn, who began amassing shares in Apple last summer, has aggressively pushed the company to pay that money out to shareholders through a huge buyback by late September. But other investors have argued that his plan put too many restrictions on the company’s management and board.

In an open letter posted to his website on Monday, Mr. Icahn cited aggressive stock repurchases by Apple, including spending $14 billion in recent weeks, as evidence that the company was moving to pay out more of its enormous cash pile to investors.

“We see no reason to persist with our nonbinding proposal, especially when the company is already so close to fulfilling our requested repurchase target,” he wrote.

Mr. Icahn acknowledged opposition to his proposal by Institutional Shareholder Services, an influential adviser to investors. In a note to clients on Sunday, the firm wrote, “The board’s latitude should not be constricted by a shareholder resolution that would micromanage the company’s capital allocation process.”

Even still, Mr. Icahn noted that I.S.S. criticized Apple for being “sluggish” in returning excess cash to shareholders and that the company’s current plan amounted to bailing out a big ship with “a leaky bucket.” In its report, the proxy adviser called for a long-term plan for dealing with thecompany’s quickly replenishing cash hoard.

Others have opposed Mr. Icahn’s proposal as well, including New York City’s comptroller, Scott M. Stringer, and Calpers, the giant California public pension fund. Mr. Stringer told DealBook on Sunday that he thought Apple was in a better position to determine its financial future than one outspoken activist investor.

Here’s a celebratory message that the comptroller posted to Twitter on Monday:

Carl Icahn dropping Proposal 10 at #Apple is a victory for shareowners!

â€" Scott M. Stringer (@scottmstringer) 10 Feb 14

Bitcoin Exchange Struggles

A major player in the Bitcoin universe was struggling to stay alive on Monday, raising questions about whether there is a fundamental flaw in the computer program that underlies the virtual currency.

The price of Bitcoin has fallen sharply, to below $600 for a single Bitcoin from more than $800 a week ago.

Mt. Gox, a Japanese company that was previously the largest Bitcoin exchange in the world, halted all customer withdrawals late last week.

On Monday, the company said its problems were caused by a previously undetected glitch in the basic Bitcoin protocol that made it possible for users to falsify transactions.

Gavin Andresen, the chief scientist at the Bitcoin Foundation, disputed Mt. Gox’s account and said the problem was at the Japanese exchange.

“The issues that Mt. Gox has been experiencing are due to an unfortunate interaction between Mt. Gox’s highly customized wallet software, their customer support procedures, and an obscure (but long-known) quirk in the way transactions are identified and not due to a flaw in the Bitcoin protocol,” Mr. Andresen said in a statement.

The price of Bitcoin recovered a bit on Monday morning, rising to nearly $650.

Mt. Gox has been struggling for months to process transactions, leading many customers to take their business to other exchanges that have vaulted past Mt. Gox in popularity.

But Mt. Gox’s claims were taken seriously because, if true, they raise basic questions about the soundness of the Bitcoin experiment, which has swept the technology and finance world over the last year, taking the price of a single coin up more than 3000 percent.

From the creation of Bitcoin in 2009, one of the most important and vaunted features of the Bitcoin program was its ability to prevent the same coins from being moved to two different places at the same time. In its announcement on Monday, Mt. Gox said that a  bug in the Bitcoin software made it possible for someone to use the Bitcoin network to alter transaction details to make it seem like a Bitcoin transfer had not occurred when, in fact, it had.

The company said: “We have discussed this solution with the Bitcoin core developers and will allow Bitcoin withdrawals again once it has been approved and standardized.”

Other exchanges did not report similar problems, but none of the biggest companies immediately put out a response.

Beyond Mt. Gox, Bitcoin users have been rattled by several setbacks in recent days. On Friday, the Russian government said Bitcoin transactions were illegal. They joined the Chinese government, which said in December that financial institutions in the country could not participate in Bitcoin transactions.

Florida prosecutors, meanwhile, arrested people on Friday who had met to exchange Bitcoins for dollars, the first such arrests.

American authorities have generally given a tentative blessing to the Bitcoin experiment. But they have warned consumers about the dangers  and the problems that could still pop up.

RBS Chief Vows to Do More to Cast Off Bank’s ‘Legacy of Excess’

Ross McEwan, the chief executive of the Royal Bank of Scotland, wants you to know that he is very, very serious about turning the bank around.

In The Guardian on Sunday, Mr. McEwan offered a catalog of the bank’s past failings, complete with details about how his firm did a poor job of serving its customers.

“In the rush for growth and profit, RBS forgot what banking is about,” Mr. McEwan wrote. “The bank valued least the people it should have valued most: its customers.”

It’s not the first time Mr. McEwan, who said he would forgo a bonus in 2013 and 2014, has acknowledged shortcomings at the bank. Mr. McEwan, who was named chief executive in August, has previously pledged to change the culture at RBS, which took a bailout from the British government in 2008 and is under pressure to repay the government and restructure its operations.

In the last five years, much has been done to defuse the bank’s legacy of excess, to clean up the culture and build a strong, stable platform for the bank. But I am acutely aware that there is still much more to do.

Organisational strategies can often be complex. For me, the next chapter for RBS is simple. It is about establishing one guiding principle that goes from the very top down to the smallest branch. Our employees who deal with customers every day understand their needs and do the best for them - this customer-focused DNA needs to run throughout the bank. We need to remember - and then never forget - that the customer is why we are in business. We need to change our behaviour at every level to reflect this simple truth. To move from stability to renewal, we need to first address and then clean up every aspect of how we treat customers.

Read the rest at The Guardian.

A Chinese Official’s Job Plea to JPMorgan’s Chief

CHINESE OFFICIAL MADE JOB PLEA TO JPMORGAN’S CHIEF  |  In yet another potential setback for JPMorgan Chase, a confidential email shows a top Chinese insurance regulator directly asked Jamie Dimon, JPMorgan’s chairman and chief executive, for a “favor” to hire a young job applicant, a family friend of the regulator. Interviews, and the previously unreported email, show that Mr. Dimon met the applicant at a meeting in 2012, Jessica Silver-Greenberg and Ben Protess report in DealBook. The meeting came as JPMorgan was seeking lucrative work from Chinese insurance companies.

While JPMorgan says that Mr. Dimon did not have anything to do with hiring the young interpreter, the “episode underscores the dual forces driving JPMorgan and other Wall Street banks to hire the family and friends of China’s ruling elite,” Ms. Silver-Greenberg and Mr. Protess write.

They add: “Until now, it was unclear whether any well-connected job applicants ever met JPMorgan executives in New York. Earlier documents that JPMorgan produced to federal authorities focused on hiring practices in Hong Kong and mainland China.

“But the latest ones show how the hires also touched the New York headquarters, where the bank awarded at least two internships to well-connected applicants.”

CHASING SAC’S ‘BIG GUY’  |  Mathew Martoma, the former portfolio manager at SAC Capital Advisors, may have been convicted on charges of insider trading last Thursday, but Steven A. Cohen, the founder of SAC, remains as hard to catch as a shadow. While Mr. Martoma now faces up to 10 years in prison, away from his wife and three young children, Mr. Cohen is still living in his 35,000-square-foot Greenwich, Conn. mansion, replete with a large art collection, and remains as elusive as ever, Matthew Goldstein and Alexandra Stevenson write in DealBook.

It is unlikely that Mr. Martoma will be willing to discuss what occurred between him and Mr. Cohen during the phone call that preceded the trades that were at the center of Mr. Martoma’s trial, as Peter J. Henning notes in the White Collar Watch column. And if Mr. Martoma does try to cooperate with the government, it is unlikely he will be taken as a credible witness, given his expulsion from Harvard Law School and the various lies that followed.

Law enforcement has once again failed to get any closer to Mr. Cohen in the nearly decade-long pursuit, but the trial of Mr. Martoma nevertheless provided a glimpse into the workings of SAC and the reverence its employees held its founder. As Chandler Bocklage, Mr. Cohen’s right-hand man, testified: “I personally think that Steve is the greatest trader of all time.”

ALIBABA SEEKS CONTROL OF AUTONAVI  |  Alibaba, the Chinese Internet giant, offered on Monday to buy the 72 percent of AutoNavi Holdings that it does not already own, in an all-cash bid that values the U.S.-listed mapping software company at about $1.58 billion. The unsolicited takeover bid is one of Alibaba’s biggest-ever acquisition attempts.

APPLE GAINS ALLY IN FIGHT AGAINST ICAHN  |  Carl C. Icahn may hold the power to move a company’s stock in just 140 characters, but other shareholders are wielding their own influence. Institutional Shareholder Services, the prominent proxy advisory firm, released a note on Sunday telling clients it should vote against Mr. Icahn’s plan for Apple to buy back $50 billion of its own stock, Michael J. de la Merced writes in DealBook. In the note, I.S.S. wrote that Apple has not spent money unnecessarily acquiring companies and that much of its cash is held overseas, meaning Apple would either incur a large tax bill or need to borrow debt to bring it back.

In addition, Scott M. Stringer, New York City’s comptroller, plans to urge other investors on Monday to vote against Mr. Icahn’s proposal, arguing that the plan puts handcuffs on the iPhone maker’s management. Mr. Stringer oversees five pension funds that together own $1.3 billion worth of Apple shares.

ON THE AGENDA  |  The Commodity Futures Trading Commission’s Technology Advisory Committee holds a public meeting at 10 a.m. to discuss swaps trading. Glenn Youngkin, the chief operating officer of the Carlyle Group, is on CNBC at 8 a.m. The Westminster Kennel Club 138th Annual Dog Show is on CNBC at 8 p.m. Curling, a favorite of Wall Street traders, begins today â€" the U.S. men’s team debuts against the colorful Norwegian team at 10 a.m. The women’s competition also begins.

THE STEALTH I.P.O.  |  GoPro did it on Friday. Twitter did it last year. And they are far from alone â€" a number of technology companies have filed confidential initial public offerings with the Securities and Exchange Commission under the 2012 JOBS Act. Under the provision, companies can file offerings without disclosing significant information about their finances to the public, David Gelles and Michael J. de la Merced report in DealBook.

The tactic allows companies to keep sensitive information private, as well as give companies the ability to test the waters before they go public. But there is a growing sense among some securities experts that the process is changing the I.P.O. process in unintended ways. The law, they argue, was meant to encourage small companies to go public rather than sell themselves, not to support powerhouses like Twitter.

CUOMO THROWS A BONE TO NEW YORK BANKS  |  Gov. Andrew M. Cuomo is pushing for New York State to change how it taxes the banking industry, hoping to discourage financial services companies from moving to other states and attract out-of-state companies to New York. He says his plan, which would drop the corporate income tax rate to its lowest level since the 1960, would create jobs. But others, including liberals, are not so sure.

SPOTLIGHT ON MICROSOFT’S NEW CHAIRMAN  |  Fortune has a revealing profile on John W. Thompson, Microsoft’s new chairman. And Mr. Thompson gave his own perspective on life to The New York Times in The Boss column in 2012.

FLAPPY BIRD PULLED AFTER IT ‘RUINS’ CREATOR’S LIFE, TOO  |  Flappy Bird, the impossible mobile game that reached the top of the most downloaded app charts for Apple and Android mobile devices, was apparently too much even for its creator Dong Nguyen, an independent developer in Vietnam. On Saturday, Mr. Nguyen announced on Twitter that he intended to pull the game from the mobile app stores, which he did on Sunday. “I can call ‘Flappy Bird’ is a success of mine. But it also ruins my simple life. So now I hate it,” Mr. Dong tweeted on Saturday.

Mergers & Acquisitions »

Deutsche Telekom to Buy Rest of Its Czech Unit  |  The German telecommunications giant will pay $1.1 billion for the remaining stake in T-Mobile Czech Republic as it turns its attention to Central and Eastern Europe as a potential growth area.
DealBook »

Nestlé Looking Into Reducing Stake in L’Oréal  |  Nestlé is considering ways to reduce its $30 billion stake in L’Oréal, Bloomberg News writes, citing an unidentified person familiar with the situation.
BLOOMBERG NEWS

Sprint Rethinks T-Mobile Acquisition After Public Antitrust Opposition  |  Sprint is reconsidering whether acquiring T-Mobile, its smaller competitor, makes sense after antitrust officials expressed strong opposition to a deal, The Wall Street Journal reports.
WALL STREET JOURNAL

Forbes Nears Sale  |  Forbes Media, which publishes Forbes magazine, is said to have attracted interest from China’s Fosun International and Singapore’s Spice Global Investments, Bloomberg News writes, citing unidentified people familiar with the situation. Final bids for the company are due on Monday.
BLOOMBERG NEWS

Charter to Nominate Directors to Time Warner Board  |  Charter Communications is expected to nominate 13 new directors to Time Warner Cable’s board as part of the takeover battle between the two companies, The Financial Times reports, citing unidentified people familiar with the situation.
FINANCIAL TIMES

INVESTMENT BANKING »

Barclays to Report 2013 Pretax Profit of $8.5 Billion  |  The British lender said Monday that it would report 2013 adjusted profit before tax of 5.2 billion pounds, or about $8.5 billion, below analysts’ expectations. Barclays is set to report its year-end results on Tuesday.
DealBook » | DealBook: Barclays and Regulators Look at Possible Theft of Customer Data

Morgan Stanley Adds 4 Executives to Operating Committee  |  Morgan Stanley does not often appoint new members to its operating committee, which made up of the top echelon of the firm’s leadership. On Friday, it added four new executives.
DealBook »

Blythe Masters of JPMorgan Is Said to Decline Advisory Post  |  Blythe Masters, the head of the commodities business at JPMorgan Chase, has declined an invitation to join an advisory committee of the C.F.T.C., the agency that regulates futures and swaps trading, people briefed on the matter said on Friday.
DealBook »

Comptroller Considers Paring Back Bank Examiners  |  The Office of the Comptroller of the Currency is rethinking its approach to examiners of Wall Street firms, The Wall Street Journal writes.
WALL STREET JOURNAL

Bank of Montreal Names New Chief of M.&A. Group  |  The Bank of Montreal announced it had appointed Lyle Wilpon, a former chief of Bank of America Merrill Lynch’s middle market mergers and acquisitions group, as the new chief of its United States M.&.A. business, Bloomberg News writes.
BLOOMBERG NEWS

Barclays to Cap Banker Bonuses  |  Barclays is said to be limiting the cash portion of bonuses for its investment bankers to 140,000 pounds, or $229,400, a 24 percent decrease from a year earlier, Bloomberg News reports.
BLOOMBERG NEWS

PRIVATE EQUITY »

K.K.R. Buys Eyewear Retailer National Vision  |  Kohlberg Kravis Roberts & Company has purchased National Vision, a discount eyewear retailer, from Berkshire Partners for more than $1 billion, The Wall Street Journal reports.
WALL STREET JOURNAL

Vintage Capital Offers $2.3 Billion for Aaron’s Chain  |  The private equity firm Vintage Capital has offered to buy Aaron’s, an electronics and furniture rental chain, for $2.3 billion, its fourth attempt in three years, Reuters reports. Vintage Capital is an Aaron’s shareholder.
REUTERS

Women’s Retailer Bebe Exploring Sale  |  Bebe Stores, a women’s retailer, is reaching out to private equity firms regarding a potential sale, Reuters reports.
REUTERS

Apollo Profit Fell 36% in Fourth Quarter  |  Apollo Global Management was a big seller of its holdings last year, but that wasn’t enough to lift the private equity giant’s profit for the final three months of 2013.
DealBook »

HEDGE FUNDS »

Soros Collects $5.5 Billion on Quantum Endowment’s Success  |  Quantum Endowment, George Soros’s hedge fund, had its second-best year in dollar terms last year, netting Mr. Soros $5.5 billion and returning Quantum to the top place among the most successful hedge funds ever, The Financial Times reports.
FINANCIAL TIMES

Former Goldman Sachs Partner Plans Hedge Fund  |  Leland Lim, a former co-head of Goldman Sachs’s macro trading team in the Asia-Pacific region outside of Japan, is said to be considering starting a macro hedge fund based in Hong Kong, Bloomberg News reports, citing unidentified people familiar with the situation.
BLOOMBERG NEWS

Two U.S. Hedge Funds in Battle Over Argentina Debt  |  The hedge funds Gramercy Funds Management and Elliott Management have taken opposing positions in handling Argentina’s debt since the country gave up on its debt payments in December 2001.
WALL STREET JOURNAL

Loeb’s Suggestion Predates Sony’s Latest Plans  |  The activist investor Daniel S. Loeb called for a breakup of Sony before the company announced last week that it would sell its personal computer business and spin off its television manufacturing unit, Bloomberg News reports. Sony’s announcement led to a surge in the company’s stock price.
BLOOMBERG NEWS

Coke and Einhorn Take Opposite Sides of Green Mountain Bet  |  Coca-Cola presumably gave Green Mountain Coffee a comprehensive review before deciding to buy a stake. But the hedge fund manager David Einhorn can’t be easily dismissed either, Kevin Allison writes in Reuters Breakingviews.
DealBook »

I.P.O./OFFERINGS »

Biotech I.P.O.’s Raise Fear of a Bubble  |  The year has started off with a bang for United States biotechnology initial public offerings, stirring up fears of a bubble, The Financial Times writes.
FINANCIAL TIMES

PubMatic Considers I.P.O.  |  PubMatic, a platform that automates buying and selling of digital advertising space, is working with banks on a potential initial public offering aimed at raising $1 billion, The Wall Street Journal reports, citing unidentified people familiar with the situation.
WALL STREET JOURNAL

Manchester United’s Stock Falls  |  The soccer club Manchester United is struggling, and so is its stock price, Quartz reports. The team’s stock price has fallen 11 percent since the start of the soccer season, though its share price is still 7 percent above its 2012 initial public offering price.
QUARTZ

VENTURE CAPITAL »

Latin America Venture Capital Fund Raises New $135 Million Fund  |  The new fund, Kaszek Ventures’ second, eclipsed its first one raised in 2011. It also signals that the region’s long-term prospects remain promising despite the current turbulence in emerging markets.
DealBook »

Investments in Medical Devices Fall  |  Venture capital investments in the medical devices sector reached its lowest point last year since 2005, The Wall Street Journal writes.
WALL STREET JOURNAL

EBay to Start Trading Bitcoin  |  The British unit of eBay, the online auction site, will open a “virtual currency” category for listing Bitcoin and other virtual currencies starting on Monday, Mashable reports.
MASHABLE

LEGAL/REGULATORY »

Barclays and Regulators Look at Possible Theft of Customer Data  |  The bank and British regulators are looking into the possible theft of personal data concerning at least 2,000 clients after a British newspaper report.
DealBook » | DealBook: Barclays to Report 2013 Pretax Profit of $8.5 Billion

New European Banking Regulator Takes Tough Stance on Banks  |  Danièle Nouy, the chief of Europe’s Single Supervisory Mechanism, said in an interview that some lenders have no future and should be allowed to “disappear in an orderly fashion,” The Financial Times reports.
FINANCIAL TIMES

A New Effort in Albany to Put Lenders in Charge of Abandoned Properties  |  New York’s attorney general is expected to outline legislation to force banks to take responsibility for houses that have been abandoned before banks have finished foreclosing on them, The New York Times writes.
NEW YORK TIMES

Puerto Rico’s Second Cut to Junk Debt  |  The new downgrade was expected to further narrow the island’s room for tight financial maneuvering and has reportedly given rise to discussions with lenders about short-term relief on certain payments.
DealBook » | 

Economy and Crime Spur New Puerto Rican Exodus  |  Puerto Rico’s debt was downgraded to junk status last week by two of the three top ratings agencies. But creditors aren’t the only ones who are worried. Puerto Rico’s extended woes, including high unemployment and pervasive crime, are causing a troubling exodus of professionals and middle-class residents to places like Florida and Texas, The New York Times reports.
NEW YORK TIMES

Sounding the Tax Alarm, to Little Applause  |  Whistle-blowers’ tips are pouring in to the I.R.S. But cash awards are not pouring out, Gretchen Morgenson writes in The New York Times.
NEW YORK TIMES

Italy Decides Against ‘Bad Bank’  |  Italy has rejected a plan to set up a “bad bank,” which would have allowed the country to take troubled assets off of its balance sheet, The Financial Times writes. Some Italian banks, including UniCredit and Intesa Sanpaolo, are continuing talks with distressed debt funds to clean up their own non-performing loan portfolios.
FINANCIAL TIMES

This post has been revised to reflect the following correction:

Correction: February 10, 2014

An earlier version of this article misstated the value of AutoNavi based on Alibaba's all-cash bid. It is about $1.58 billion, not $1.8 billion.

Alibaba Seeks Control of AutoNavi, a Chinese Mapping Company

Alibaba, the Chinese Internet giant, offered on Monday to buy the 72 percent of AutoNavi Holdings that it did not already own, in an all-cash bid that values AutoNavi, a mapping software company, at about $1.58 billion.

Already a behemoth in e-commerce, Alibaba is seeking to move into the fast-growing mapping industry, one where the company is facing growing pressure from rivals like Baidu and Tencent, as all three try to expand their presence on smartphones.

To blunt its rivals’ moves, Alibaba is seeking to buy full control of AutoNavi, a company listed in the United States that holds a rare mapping license from the Chinese government. That perch has made it an important provider of mapping data, both for its own app and for companies like Google and Apple.

Alibaba first forged ties with the company last May, when it bought a 28 percent stake for $294 million and agreed to begin cooperating on e-commerce products.

In a letter to AutoNavi’s board sent on Monday, Alibaba said it would pay $5.25 per ordinary share or $21 per American depositary receipt, which represents four ordinary shares. The offer represents a 26 percent premium to AutoNavi’s A.D.R. closing price on Friday and a nearly 40 percent premium to its 60-day volume-weighted average price.

“We believe that Alibaba is uniquely positioned to offer superior value to AutoNavi’s shareholders based on our complementary, rather than competitive, business strategies and the potential synergies we can achieve from a full combination,” Joseph C. Tsai, Alibaba’s executive vice chairman, wrote in the letter.

The unsolicited takeover bid is one of Alibaba’s biggest-ever acquisition attempts. And it represents a major initiative ahead of the company’s initial public offering, which is expected to come later this year in one of the biggest market debuts in recent memory.

The Chinese titan has been moving to acquire stakes in businesses that it believes will help broaden its e-commerce empire. It has already purchased an 18 percent stake in Sina Weibo, a Chinese equivalent to Twitter, and a minority stake in ShopRunner, a retail shipping service run by a former chief executive of Yahoo.

Analysts had expected that Alibaba would seek full control of AutoNavi. Under the terms of the investment last May, Alibaba has the right of first refusal to buy the mapping data provider. In Monday’s letter, Mr. Tsai wrote that his company was interested only in a deal and was not willing to sell its stake to another suitor.

It is also betting that the Chinese government will not let a foreign-controlled company buy AutoNavi.

Mr. Tsai, who sits on AutoNavi’s board, wrote in the letter that he expected the company to form an independent committee of directors to consider the Alibaba bid.

Alibaba is being counseled by the law firms Simpson Thacher & Bartlett, Fangda Partners and Maples and Calder.

This post has been revised to reflect the following correction:

Correction: February 10, 2014

An earlier version of this article misstated the value of AutoNavi based on Alibaba's all-cash bid. It is about $1.58 billion, not $1.8 billion.

Barclays Says It Will Miss Pretax Profit Forecasts for 2013

LONDON - The British lender Barclays said Monday that it would report 2013 adjusted profit before tax of 5.2 billion pounds, or about $8.5 billion, below analysts’ expectations.

Barclays is expected to report its full-year results on Tuesday. The bank said its statutory profit before tax would be £2.9 billion.

Analysts had expected the bank to report pretax profit of £5.4 billion, just above the £5.2 billion it revealed on Monday. In 2012, Barclays reported adjusted profit before tax of £7.05 billion.

Barclays is one of several European banks that have announced plans to take charges in the fourth quarter related to past problems.

In January, the bank said that its fourth-quarter results would include additional charges of £110 million against income in its investment bank related to litigation and regulatory penalties.

Deutsche Bank and the Royal Bank of Scotland have announced plans to take multibillion-dollar charges related to mortgage-backed securities and other legal liabilities.

Lloyds Banking Group, which will report its year-end results on Thursday, said it would set aside £1.9 billion to cover potential claims related to the improper selling of payment protection insurance, a contentious insurance product that has cost British banks billions of dollars, and other products.

Lloyds, which is partly owned by the British government, has set aside £9.8 billion to cover potential payment protection insurance claims since 2011.

A new problem also is brewing for the Barclays chief executive, Antony Jenkins.

On Sunday, Barclays announced that it was investigating the possible theft of personal data of at least 2,000 customers. The bank said the breach appears to be limited to customers of its financial planning business, which closed in 2011.

British regulators also are looking into the case.

Last week, Mr. Jenkins said that he would forgo a bonus for 2013 in light of the bank’s restructuring costs and litigation expenses at the bank. Mr. Jenkins, who declined to accept a bonus in 2012, will still receive a base salary of £1.1 million. He could have received a bonus as high as £2.75 million.

As part of its restructuring effort, Barclays hopes to cut annual costs by £1.7 billion by 2015. Last year, the lender announced that it planned to eliminate at least 3,700 jobs, including 1,800 in its corporate and investment banking businesses.

It is preparing to cut another 400 jobs in the investment bank, according to a person familiar with the matter.

The bank is expected to provide more detail about the progress of its restructuring on Tuesday. Barclays employs about 140,000 people worldwide.

Barclays released its overall profit number a day early after a preview of its results in The Financial Times on Monday came close to the actual numbers, according to a person familiar with the matter. British companies face strict regulations on the release of market-sensitive information. Barclays felt it needed to release the overall number in order to comply with those rules, said the person, who wasn’t authorized to discuss the matter publicly.

Shares of Barclays were up 5.4 percent to 277.05 pence in trading in London on Monday.

Alibaba Seeks Control of AutoNavi, a Chinese Mapping Company

Alibaba, the Chinese Internet giant, offered on Monday to buy the 72 percent of AutoNavi Holdings that it did not already own, in an all-cash bid that values AutoNavi, a mapping software company, at about $1.58 billion.

Already a behemoth in e-commerce, Alibaba is seeking to move into the fast-growing mapping industry, one where the company is facing growing pressure from rivals like Baidu and Tencent, as all three try to expand their presence on smartphones.

To blunt its rivals’ moves, Alibaba is seeking to buy full control of AutoNavi, a company listed in the United States that holds a rare mapping license from the Chinese government. That perch has made it an important provider of mapping data, both for its own app and for companies like Google and Apple.

Alibaba first forged ties with the company last May, when it bought a 28 percent stake for $294 million and agreed to begin cooperating on e-commerce products.

In a letter to AutoNavi’s board sent on Monday, Alibaba said it would pay $5.25 per ordinary share or $21 per American depositary receipt, which represents four ordinary shares. The offer represents a 26 percent premium to AutoNavi’s A.D.R. closing price on Friday and a nearly 40 percent premium to its 60-day volume-weighted average price.

“We believe that Alibaba is uniquely positioned to offer superior value to AutoNavi’s shareholders based on our complementary, rather than competitive, business strategies and the potential synergies we can achieve from a full combination,” Joseph C. Tsai, Alibaba’s executive vice chairman, wrote in the letter.

The unsolicited takeover bid is one of Alibaba’s biggest-ever acquisition attempts. And it represents a major initiative ahead of the company’s initial public offering, which is expected to come later this year in one of the biggest market debuts in recent memory.

The Chinese titan has been moving to acquire stakes in businesses that it believes will help broaden its e-commerce empire. It has already purchased an 18 percent stake in Sina Weibo, a Chinese equivalent to Twitter, and a minority stake in ShopRunner, a retail shipping service run by a former chief executive of Yahoo.

Analysts had expected that Alibaba would seek full control of AutoNavi. Under the terms of the investment last May, Alibaba has the right of first refusal to buy the mapping data provider. In Monday’s letter, Mr. Tsai wrote that his company was interested only in a deal and was not willing to sell its stake to another suitor.

It is also betting that the Chinese government will not let a foreign-controlled company buy AutoNavi.

Mr. Tsai, who sits on AutoNavi’s board, wrote in the letter that he expected the company to form an independent committee of directors to consider the Alibaba bid.

Alibaba is being counseled by the law firms Simpson Thacher & Bartlett, Fangda Partners and Maples and Calder.

This post has been revised to reflect the following correction:

Correction: February 10, 2014

An earlier version of this article misstated the value of AutoNavi based on Alibaba's all-cash bid. It is about $1.58 billion, not $1.8 billion.

A Chinese Official’s Job Plea to JPMorgan’s Chief

CHINESE OFFICIAL MADE JOB PLEA TO JPMORGAN’S CHIEF  |  In yet another potential setback for JPMorgan Chase, a confidential email shows a top Chinese insurance regulator directly asked Jamie Dimon, JPMorgan’s chairman and chief executive, for a “favor” to hire a young job applicant, a family friend of the regulator. Interviews, and the previously unreported email, show that Mr. Dimon met the applicant at a meeting in 2012, Jessica Silver-Greenberg and Ben Protess report in DealBook. The meeting came as JPMorgan was seeking lucrative work from Chinese insurance companies.

While JPMorgan says that Mr. Dimon did not have anything to do with hiring the young interpreter, the “episode underscores the dual forces driving JPMorgan and other Wall Street banks to hire the family and friends of China’s ruling elite,” Ms. Silver-Greenberg and Mr. Protess write.

They add: “Until now, it was unclear whether any well-connected job applicants ever met JPMorgan executives in New York. Earlier documents that JPMorgan produced to federal authorities focused on hiring practices in Hong Kong and mainland China.

“But the latest ones show how the hires also touched the New York headquarters, where the bank awarded at least two internships to well-connected applicants.”

CHASING SAC’S ‘BIG GUY’  |  Mathew Martoma, the former portfolio manager at SAC Capital Advisors, may have been convicted on charges of insider trading last Thursday, but Steven A. Cohen, the founder of SAC, remains as hard to catch as a shadow. While Mr. Martoma now faces up to 10 years in prison, away from his wife and three young children, Mr. Cohen is still living in his 35,000-square-foot Greenwich, Conn. mansion, replete with a large art collection, and remains as elusive as ever, Matthew Goldstein and Alexandra Stevenson write in DealBook.

It is unlikely that Mr. Martoma will be willing to discuss what occurred between him and Mr. Cohen during the phone call that preceded the trades that were at the center of Mr. Martoma’s trial, as Peter J. Henning notes in the White Collar Watch column. And if Mr. Martoma does try to cooperate with the government, it is unlikely he will be taken as a credible witness, given his expulsion from Harvard Law School and the various lies that followed.

Law enforcement has once again failed to get any closer to Mr. Cohen in the nearly decade-long pursuit, but the trial of Mr. Martoma nevertheless provided a glimpse into the workings of SAC and the reverence its employees held its founder. As Chandler Bocklage, Mr. Cohen’s right-hand man, testified: “I personally think that Steve is the greatest trader of all time.”

ALIBABA SEEKS CONTROL OF AUTONAVI  |  Alibaba, the Chinese Internet giant, offered on Monday to buy the 72 percent of AutoNavi Holdings that it does not already own, in an all-cash bid that values the U.S.-listed mapping software company at about $1.58 billion. The unsolicited takeover bid is one of Alibaba’s biggest-ever acquisition attempts.

APPLE GAINS ALLY IN FIGHT AGAINST ICAHN  |  Carl C. Icahn may hold the power to move a company’s stock in just 140 characters, but other shareholders are wielding their own influence. Institutional Shareholder Services, the prominent proxy advisory firm, released a note on Sunday telling clients it should vote against Mr. Icahn’s plan for Apple to buy back $50 billion of its own stock, Michael J. de la Merced writes in DealBook. In the note, I.S.S. wrote that Apple has not spent money unnecessarily acquiring companies and that much of its cash is held overseas, meaning Apple would either incur a large tax bill or need to borrow debt to bring it back.

In addition, Scott M. Stringer, New York City’s comptroller, plans to urge other investors on Monday to vote against Mr. Icahn’s proposal, arguing that the plan puts handcuffs on the iPhone maker’s management. Mr. Stringer oversees five pension funds that together own $1.3 billion worth of Apple shares.

ON THE AGENDA  |  The Commodity Futures Trading Commission’s Technology Advisory Committee holds a public meeting at 10 a.m. to discuss swaps trading. Glenn Youngkin, the chief operating officer of the Carlyle Group, is on CNBC at 8 a.m. The Westminster Kennel Club 138th Annual Dog Show is on CNBC at 8 p.m. Curling, a favorite of Wall Street traders, begins today â€" the U.S. men’s team debuts against the colorful Norwegian team at 10 a.m. The women’s competition also begins.

THE STEALTH I.P.O.  |  GoPro did it on Friday. Twitter did it last year. And they are far from alone â€" a number of technology companies have filed confidential initial public offerings with the Securities and Exchange Commission under the 2012 JOBS Act. Under the provision, companies can file offerings without disclosing significant information about their finances to the public, David Gelles and Michael J. de la Merced report in DealBook.

The tactic allows companies to keep sensitive information private, as well as give companies the ability to test the waters before they go public. But there is a growing sense among some securities experts that the process is changing the I.P.O. process in unintended ways. The law, they argue, was meant to encourage small companies to go public rather than sell themselves, not to support powerhouses like Twitter.

CUOMO THROWS A BONE TO NEW YORK BANKS  |  Gov. Andrew M. Cuomo is pushing for New York State to change how it taxes the banking industry, hoping to discourage financial services companies from moving to other states and attract out-of-state companies to New York. He says his plan, which would drop the corporate income tax rate to its lowest level since the 1960, would create jobs. But others, including liberals, are not so sure.

SPOTLIGHT ON MICROSOFT’S NEW CHAIRMAN  |  Fortune has a revealing profile on John W. Thompson, Microsoft’s new chairman. And Mr. Thompson gave his own perspective on life to The New York Times in The Boss column in 2012.

FLAPPY BIRD PULLED AFTER IT ‘RUINS’ CREATOR’S LIFE, TOO  |  Flappy Bird, the impossible mobile game that reached the top of the most downloaded app charts for Apple and Android mobile devices, was apparently too much even for its creator Dong Nguyen, an independent developer in Vietnam. On Saturday, Mr. Nguyen announced on Twitter that he intended to pull the game from the mobile app stores, which he did on Sunday. “I can call ‘Flappy Bird’ is a success of mine. But it also ruins my simple life. So now I hate it,” Mr. Dong tweeted on Saturday.

Mergers & Acquisitions »

Deutsche Telekom to Buy Rest of Its Czech Unit  |  The German telecommunications giant will pay $1.1 billion for the remaining stake in T-Mobile Czech Republic as it turns its attention to Central and Eastern Europe as a potential growth area.
DealBook »

Nestlé Looking Into Reducing Stake in L’Oréal  |  Nestlé is considering ways to reduce its $30 billion stake in L’Oréal, Bloomberg News writes, citing an unidentified person familiar with the situation.
BLOOMBERG NEWS

Sprint Rethinks T-Mobile Acquisition After Public Antitrust Opposition  |  Sprint is reconsidering whether acquiring T-Mobile, its smaller competitor, makes sense after antitrust officials expressed strong opposition to a deal, The Wall Street Journal reports.
WALL STREET JOURNAL

Forbes Nears Sale  |  Forbes Media, which publishes Forbes magazine, is said to have attracted interest from China’s Fosun International and Singapore’s Spice Global Investments, Bloomberg News writes, citing unidentified people familiar with the situation. Final bids for the company are due on Monday.
BLOOMBERG NEWS

Charter to Nominate Directors to Time Warner Board  |  Charter Communications is expected to nominate 13 new directors to Time Warner Cable’s board as part of the takeover battle between the two companies, The Financial Times reports, citing unidentified people familiar with the situation.
FINANCIAL TIMES

INVESTMENT BANKING »

Barclays to Report 2013 Pretax Profit of $8.5 Billion  |  The British lender said Monday that it would report 2013 adjusted profit before tax of 5.2 billion pounds, or about $8.5 billion, below analysts’ expectations. Barclays is set to report its year-end results on Tuesday.
DealBook » | DealBook: Barclays and Regulators Look at Possible Theft of Customer Data

Morgan Stanley Adds 4 Executives to Operating Committee  |  Morgan Stanley does not often appoint new members to its operating committee, which made up of the top echelon of the firm’s leadership. On Friday, it added four new executives.
DealBook »

Blythe Masters of JPMorgan Is Said to Decline Advisory Post  |  Blythe Masters, the head of the commodities business at JPMorgan Chase, has declined an invitation to join an advisory committee of the C.F.T.C., the agency that regulates futures and swaps trading, people briefed on the matter said on Friday.
DealBook »

Comptroller Considers Paring Back Bank Examiners  |  The Office of the Comptroller of the Currency is rethinking its approach to examiners of Wall Street firms, The Wall Street Journal writes.
WALL STREET JOURNAL

Bank of Montreal Names New Chief of M.&A. Group  |  The Bank of Montreal announced it had appointed Lyle Wilpon, a former chief of Bank of America Merrill Lynch’s middle market mergers and acquisitions group, as the new chief of its United States M.&.A. business, Bloomberg News writes.
BLOOMBERG NEWS

Barclays to Cap Banker Bonuses  |  Barclays is said to be limiting the cash portion of bonuses for its investment bankers to 140,000 pounds, or $229,400, a 24 percent decrease from a year earlier, Bloomberg News reports.
BLOOMBERG NEWS

PRIVATE EQUITY »

K.K.R. Buys Eyewear Retailer National Vision  |  Kohlberg Kravis Roberts & Company has purchased National Vision, a discount eyewear retailer, from Berkshire Partners for more than $1 billion, The Wall Street Journal reports.
WALL STREET JOURNAL

Vintage Capital Offers $2.3 Billion for Aaron’s Chain  |  The private equity firm Vintage Capital has offered to buy Aaron’s, an electronics and furniture rental chain, for $2.3 billion, its fourth attempt in three years, Reuters reports. Vintage Capital is an Aaron’s shareholder.
REUTERS

Women’s Retailer Bebe Exploring Sale  |  Bebe Stores, a women’s retailer, is reaching out to private equity firms regarding a potential sale, Reuters reports.
REUTERS

Apollo Profit Fell 36% in Fourth Quarter  |  Apollo Global Management was a big seller of its holdings last year, but that wasn’t enough to lift the private equity giant’s profit for the final three months of 2013.
DealBook »

HEDGE FUNDS »

Soros Collects $5.5 Billion on Quantum Endowment’s Success  |  Quantum Endowment, George Soros’s hedge fund, had its second-best year in dollar terms last year, netting Mr. Soros $5.5 billion and returning Quantum to the top place among the most successful hedge funds ever, The Financial Times reports.
FINANCIAL TIMES

Former Goldman Sachs Partner Plans Hedge Fund  |  Leland Lim, a former co-head of Goldman Sachs’s macro trading team in the Asia-Pacific region outside of Japan, is said to be considering starting a macro hedge fund based in Hong Kong, Bloomberg News reports, citing unidentified people familiar with the situation.
BLOOMBERG NEWS

Two U.S. Hedge Funds in Battle Over Argentina Debt  |  The hedge funds Gramercy Funds Management and Elliott Management have taken opposing positions in handling Argentina’s debt since the country gave up on its debt payments in December 2001.
WALL STREET JOURNAL

Loeb’s Suggestion Predates Sony’s Latest Plans  |  The activist investor Daniel S. Loeb called for a breakup of Sony before the company announced last week that it would sell its personal computer business and spin off its television manufacturing unit, Bloomberg News reports. Sony’s announcement led to a surge in the company’s stock price.
BLOOMBERG NEWS

Coke and Einhorn Take Opposite Sides of Green Mountain Bet  |  Coca-Cola presumably gave Green Mountain Coffee a comprehensive review before deciding to buy a stake. But the hedge fund manager David Einhorn can’t be easily dismissed either, Kevin Allison writes in Reuters Breakingviews.
DealBook »

I.P.O./OFFERINGS »

Biotech I.P.O.’s Raise Fear of a Bubble  |  The year has started off with a bang for United States biotechnology initial public offerings, stirring up fears of a bubble, The Financial Times writes.
FINANCIAL TIMES

PubMatic Considers I.P.O.  |  PubMatic, a platform that automates buying and selling of digital advertising space, is working with banks on a potential initial public offering aimed at raising $1 billion, The Wall Street Journal reports, citing unidentified people familiar with the situation.
WALL STREET JOURNAL

Manchester United’s Stock Falls  |  The soccer club Manchester United is struggling, and so is its stock price, Quartz reports. The team’s stock price has fallen 11 percent since the start of the soccer season, though its share price is still 7 percent above its 2012 initial public offering price.
QUARTZ

VENTURE CAPITAL »

Latin America Venture Capital Fund Raises New $135 Million Fund  |  The new fund, Kaszek Ventures’ second, eclipsed its first one raised in 2011. It also signals that the region’s long-term prospects remain promising despite the current turbulence in emerging markets.
DealBook »

Investments in Medical Devices Fall  |  Venture capital investments in the medical devices sector reached its lowest point last year since 2005, The Wall Street Journal writes.
WALL STREET JOURNAL

EBay to Start Trading Bitcoin  |  The British unit of eBay, the online auction site, will open a “virtual currency” category for listing Bitcoin and other virtual currencies starting on Monday, Mashable reports.
MASHABLE

LEGAL/REGULATORY »

Barclays and Regulators Look at Possible Theft of Customer Data  |  The bank and British regulators are looking into the possible theft of personal data concerning at least 2,000 clients after a British newspaper report.
DealBook » | DealBook: Barclays to Report 2013 Pretax Profit of $8.5 Billion

New European Banking Regulator Takes Tough Stance on Banks  |  Danièle Nouy, the chief of Europe’s Single Supervisory Mechanism, said in an interview that some lenders have no future and should be allowed to “disappear in an orderly fashion,” The Financial Times reports.
FINANCIAL TIMES

A New Effort in Albany to Put Lenders in Charge of Abandoned Properties  |  New York’s attorney general is expected to outline legislation to force banks to take responsibility for houses that have been abandoned before banks have finished foreclosing on them, The New York Times writes.
NEW YORK TIMES

Puerto Rico’s Second Cut to Junk Debt  |  The new downgrade was expected to further narrow the island’s room for tight financial maneuvering and has reportedly given rise to discussions with lenders about short-term relief on certain payments.
DealBook » | 

Economy and Crime Spur New Puerto Rican Exodus  |  Puerto Rico’s debt was downgraded to junk status last week by two of the three top ratings agencies. But creditors aren’t the only ones who are worried. Puerto Rico’s extended woes, including high unemployment and pervasive crime, are causing a troubling exodus of professionals and middle-class residents to places like Florida and Texas, The New York Times reports.
NEW YORK TIMES

Sounding the Tax Alarm, to Little Applause  |  Whistle-blowers’ tips are pouring in to the I.R.S. But cash awards are not pouring out, Gretchen Morgenson writes in The New York Times.
NEW YORK TIMES

Italy Decides Against ‘Bad Bank’  |  Italy has rejected a plan to set up a “bad bank,” which would have allowed the country to take troubled assets off of its balance sheet, The Financial Times writes. Some Italian banks, including UniCredit and Intesa Sanpaolo, are continuing talks with distressed debt funds to clean up their own non-performing loan portfolios.
FINANCIAL TIMES

This post has been revised to reflect the following correction:

Correction: February 10, 2014

An earlier version of this article misstated the value of AutoNavi based on Alibaba's all-cash bid. It is about $1.58 billion, not $1.8 billion.